There are a number of pre-immigration tax planning considerations that prospective immigrants or new residents should consider.
Individuals are subject to Canadian taxation based on their residency in Canada, regardless of their country of citizenship. Residents of Canada are subject to Canadian income tax on the residents’ worldwide income. Depending on the provinces that the new residents will settle in, the top marginal tax rates for individuals range from 39% in Alberta to 50% in Ontario. Canada also has a complex tax system to ensure income earned indirectly by Canadian taxpayers through foreign trusts, companies or other entities to be subject to tax in Canada. Due to recent changes in Canada’s tax laws, prospective immigrants can no longer use immigration trusts to obtain a Canadian tax exemption for up to five years on foreign income and capital gains.
Prior to your entry into Canada, we can assist in pre-immigration tax planning to help you to minimize your future Canadian taxes. Our pre-immigration tax planning services include but not limit to the following:
- Planning for the date of entry into Canada;
- Planning for inheritance from relatives living outside of Canada;
- Planning for Canadian wills and powers of attorney;
- If you are a US citizen or green card holder, consider gift and estate tax issues and other unique US tax treatments for its citizens in conjunction with the tax regime in Canada (for example, principal residence exemptions, replacement property rules and capital gains exemptions);
- If you own investments in non-resident entities that derive their values directly or indirectly primarily from portfolio investments, consider the application and potential implications of Canada’s foreign investment entity rules; or
- If you own shares in foreign companies, consider the application and potential implications of Canada’s foreign affiliate rules.